So far this year, investors have been pretty relaxed about the PIIGS—debt-ridden Portugal, Italy, Ireland, Greece and Spain—because the market believes Europe’s politicians will deliver a "grand solution".

To be precise, that by their March 24 summit, EU leaders would confirm they’re pouring billions more into EU bailout funds, while enabling PIIGS to borrow more cheaply and even buy back their own debt

But the moment of truth may be far closer. In fact, Friday.

Before the Germans will agree to pump in extra cash from their taxpayers, backed by the French, they want each leader to agree to legislation at home that will limit the size of their future national deficits. The Greeks are already refusing point blank. Things may boil to the surface at an extraordinary summit on Friday.

If the assembled Euro Zone leaders are seen struggling to resolve what the Germans obliquely call their "Competitiveness Pact," investors could book profits on their Europe trades, at the very least.

Traders say the Euro’s recent strength has all been about dollar weakness and the ECB signaling higher rates next month. More than a big re-sensitization to the Euro Zone’s problems, today's loses for the single currency seem more about profit-taking on a fantastic run. But red flags are going up elsewhere.

For about a month, the cost of insuring against government default across the periphery of the Euro Zone has been rising.

Similarly, the extra yield the market demands to hold Portuguese government debt over benchmark German bunds is also heading towards the 4.5 percent thumb rule point of no return.

But the "poster boy" in Europe remains Greece. Yesterday, Moody's cut Athens’ credit rating by three notches and left it on negative watch. Today, the extra the market demands to hold Greek government debt over Bunds today rocketed past 9.6 percent and towards levels we’ve not seen since the peak of the crisis last spring.